Being labeled as a high risk borrower, can be a bad situation to be in, refinancing your mortgage could however help bring relief to this situation. So it seems a little odd to have to take out a new loan to pay off your other loans. This is however very beneficial if done right, and a way of making your current financial situation a little easier, while keeping your home.

There are a lot of mortgage lenders that prey on home owners looking to refinance with bad credit. With rates as low as they are, and so many people looking to refinance, these companies will kill you with over the top fees, or a bait and switch mortgage loan rate, etc. Here are some things you can do to prevent getting sucked into fly by night mortgage refinance company.

Do research on sub prime interest rates – Avoid at all cost loans that are 2% or more above the prime rates. While it is normal for sub prime rates to be higher, that is just to substantial of a percentage.
Do lots of comparison shopping – As with a big purchase, or any other long term financial situation, do your research prior to parting with your money. It is not impossible to refinance your mortgage with bad credit, however, the amount of work you as a borrower must do beforehand does make a big difference.
Read all terms and conditions carefully – Be sure to be on the look out for prepayment clasues or other odd sounding clauses that will prevent you from having any flexibility in the future.
Adjusted rate mortgages and interest only loans are now advisable – You are almost always better with a fixed rate mortgage. Even if the APR on a ARM loan is really good right now, in the long run it is almost always better to have the fixed rate. Especially with rates as low as they are now.
Don't get taken by Weird Fees – These are random fees charged by the mortgage broker. They are known in the industry as plump fees, or junk fees. Examples may include, fees higher than 2% for origination, phone and fax fees, transportation fees between office and bank, I have even seen fees that charge by the email. Google “junk fees” for a more detailed rundown of the types of fees I'm talking about

With research, which is easily done these days on the internet, you will be able to refinance in a way that is beneficial financially for you. Be sure that you check multiple sources for mortgage refinance quotes, especially with bad credit. The differences between mortgage company offers can be huge depending how much you know going in. Do not expect a mortgage refinance to be the be all end all to your financial situation. If you are not careful you will just repeat this viscous cycle in a matter of years.
-M Petrone


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